EX-99.1 2 ltotal_ex99-1.htm EXHIBIT 99.1 TOTAL S.A. EXHIBIT 99.1

Exhibit 99.1

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The financial information on pages 1-14 of this exhibit concerning TOTAL S.A. and its subsidiaries and affiliates (collectively, “TOTAL” or the “Group”) with respect to the second quarter of 2018 and six months ended June 30, 2018, has been derived from TOTAL’s unaudited consolidated balance sheets as of June 30, 2018 and unaudited statements of income, comprehensive income, cash flow and changes in shareholders’ equity and business segment information for the second quarter of 2018 and six months ended June 30, 2018 presented on pages 15-22 and 35-46 of this exhibit. The following discussion should be read in conjunction with the aforementioned financial statements and with the information, including TOTAL’s audited consolidated financial statements and related notes, provided in TOTAL’s Annual Report on Form 20-F for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2018.

 

A. KEY FIGURES

 

2Q18  1Q18  2Q17  2Q18 vs
2Q17
   in millions of dollars
except earnings per share and number of shares
 1H18   1H17  1H18 vs
1H17
 52,540    49,611    39,915    +32%   Non-Group sales   102,151     81,098    +26%
                     Adjusted net operating income from business segments(a)                
 2,687    2,183    1,359    +98%   • Exploration & Production   4,870     2,741    +78%
 193    115    95    +103%   • Gas, Renewables & Power   308     156    +97%
 821    720    861    -5%   • Refining & Chemicals   1,541     1,884    -18%
 478    367    433    +10%   • Marketing & Services   845     734    +15%
 1,103    484    310    x3.6    Net income (loss) from equity affiliates   1,587     858    +85%
 1.38    0.99    0.79    +75%   Fully-diluted earnings per share ($)   2.38     1.92    +24%
 2,646    2,568    2,485    +7%   Fully-diluted weighted-average shares (millions)   2,608     2,471    +6%
 3,721    2,636    2,037    +83%   Net income (Group share)   6,357     4,886    +30%
 3,787    6,724    4,205    -10%   Investments(b)   10,511     7,883    +33%
 1,274    2,585    360    x3.5    Divestments(c)   3,859     3,258    +18%
 2,513    4,139    3,845    -35%   Net investments(d)   6,652     4,625    +44%
 2,780    2,620    3,949    -30%   Organic investments(e)   5,400     6,893    -22%
 333    3,474    52    x6.4    Resource acquisitions(f)   3,807     64    n/a 
 6,246    2,081    4,640    +35%   Cash flow from operations   8,327     9,341    -11%
                     Of which:                
 (856)   (3,222)   (268)   n/a    • (increase)/decrease in working capital(g)   (4,078)    (322)   n/a 
 (398)   (298)   (247)   +61%   • financial charges   (696)    (462)   +51%

 

 

 

  (a) Adjusted results are defined as income using replacement cost, adjusted for special items, excluding the impact of changes for fair value. See “Analysis of business segment results” below and page 12 for further details.
  (b) Including acquisitions and increases in non-current loans.
  (c) Including divestments and reimbursements of non-current loans.
  (d) “Net investments” = investments - divestments - repayment of non-current loans - other operations with non-controlling interests.
  (e) “Organic investments” = net investments excluding acquisitions, asset sales and other operations with non-controlling interests. See page 12 of this exhibit.
  (f) “Resource acquisitions” = acquisition of a participating interest in an oil and gas mining property by way of assignment of rights and obligations in the corresponding permit or license and related contracts, with a view to producing the recoverable oil and gas.
  (g) The change in working capital as determined using the replacement cost method was $(153) million in 2Q18, $(3,289) million in 1Q18, $(694) million in 2Q17, $(3,442) million in 1H18 and $(680) million in 1H17. For information on the replacement cost method, refer to the second paragraph of “B. Analysis of business segment results”. See also “C. Group results — Cash flow”.

 

B. ANALYSIS OF BUSINESS SEGMENT RESULTS

 

The financial information for each business segment is reported on the same basis as that used internally by the chief operating decision-maker in assessing segment performance and the allocation of segment resources. Due to their particular nature or significance, certain transactions qualifying as “special items” are excluded from the business segment figures. In general, special items relate to transactions that are significant, infrequent or unusual. In certain instances, certain transactions such as restructuring costs or asset disposals, which are not considered to be representative of the normal course of business, may qualify as special items although they may have occurred in prior years or are likely to recur in following years.

 

In accordance with IAS 2, the Group values inventories of petroleum products in its financial statements according to the First-In, First-Out (FIFO) method and other inventories using the weighted-average cost method. Under the FIFO method, the cost of inventory is based on the historic cost of acquisition or manufacture rather than the current replacement cost. In volatile energy markets, this can have a significant distorting effect on the reported income. Accordingly, the adjusted results of the Refining & Chemicals and Marketing & Services segments are presented according to the replacement cost method in order to facilitate the comparability of the Group’s results with those of its competitors and to help illustrate the operating performance of these segments excluding the impact of oil price changes on the replacement of inventories. In the replacement cost method, which approximates the Last-In, First-Out (LIFO) method, the variation of inventory values in the statement of income is, depending on the nature of the inventory, determined using either the month-end price differential between one period and another or the average prices of the period. The inventory valuation effect is the difference between the results under the FIFO and replacement cost methods.

1

The effect of changes in fair value presented as an adjustment item reflects, for trading inventories and storage contracts, differences between internal measures of performance used by TOTAL’s management and the accounting for these transactions under IFRS, which requires that trading inventories be recorded at their fair value using period-end spot prices. In order to best reflect the management of economic exposure through derivative transactions, internal indicators used to measure performance include valuations of trading inventories recorded at their fair value based on forward prices. Furthermore, TOTAL, in its trading activities, enters into storage contracts, the future effects of which are recorded at fair value in the Group’s internal economic performance. IFRS, by requiring accounting for storage contracts on an accrual basis, precludes recognition of this fair value effect.

 

The adjusted business segment results (adjusted operating income and adjusted net operating income) are defined as replacement cost results, adjusted for special items, excluding the effect of changes in fair value. For further information on the adjustments affecting operating income on a segment-by-segment basis, and for a reconciliation of segment figures to figures reported in TOTAL’s interim consolidated financial statements, see pages 35-43 of this exhibit.

 

The Group measures performance at the segment level on the basis of adjusted net operating income. Net operating income comprises operating income of the relevant segment after deducting the amortization and the depreciation of intangible assets other than leasehold rights, translation adjustments and gains or losses on the sale of assets, as well as all other income and expenses related to capital employed (dividends from non-consolidated companies, income from equity affiliates and capitalized interest expenses) and after income taxes applicable to the above. The income and expenses not included in net operating income that are included in net income are interest expenses related to long-term liabilities net of interest earned on cash and cash equivalents, after applicable income taxes (net cost of net debt and non-controlling interests). Adjusted net operating income excludes the effect of the adjustments (special items and the inventory valuation effect) described above.

 

As of January 1, 2018, the reporting of the cash flow from operations at the segment level changed due to the transfer of financial charges to the Corporate segment. The Corporate segment includes the Group’s holdings operating and financial activities. As a result of this change in reporting, the 2017 comparative information has been restated at the segment level.

 

  B.1. Exploration & Production segment

 

  Environment — liquids and gas price realizations*
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
     1H18  1H17  1H18 vs
1H17
 74.4    66.8    49.6    +50%  Brent ($/b)   70.6    51.7    +37%
 69.5    60.4    45.1    +54%  Average liquids price ($/b)   65.3    47.1    +39%
 4.49    4.73    3.93    +14%  Average gas price ($/Mbtu)   4.61    4.01    +15%
 54.3    47.3    35.5    +53%  Average hydrocarbons price ($/boe)   50.9    36.7    +39%

 

 

 

* Consolidated subsidiaries, excluding fixed margins.

 

  Production
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  Hydrocarbon production  1H18  1H17  1H18 vs
1H17
 2,717    2,703    2,500    +9%  Combined production (kboe/d)   2,710    2,534    +7%
 1,582    1,481    1,298    +22%  • Liquids (kb/d)   1,532    1,300    +18%
 6,176    6,664    6,500    -5%  • Gas (Mcf/d)   6,419    6,696    -4%
2

Hydrocarbon production was 2,717 thousand barrels of oil equivalent per day (kboe/d) in the second quarter 2018, an increase of close to 9% compared to the second quarter 2017, due to:

+7% due to new project start-ups and ramp-ups, notably Moho Nord, Yamal LNG, Edradour-Glenlivet, Kashagan, Fort Hills, Timimoun and Libra;
+6% portfolio effect, mainly due to the integration of Al-Shaheen in Qatar, the Maersk Oil assets, Waha in Libya, and Lapa and Iara in Brazil, which were partially offset by the expiration of the Mahakam permit in Indonesia at the end of 2017;
-4% due to heavier seasonal maintenance activity, the PSC price effect1 and natural field decline.

 

In the first half 2018, hydrocarbon production was 2,710 kboe/d, an increase of 7% compared to the first half 2017, due to:

+7% due to new project start-ups and ramp-ups, notably Moho Nord, Yamal LNG, Edradour-Glenlivet, Kashagan, Fort Hills and Libra;
+3% portfolio effect, mainly due to the integration of Al-Shaheen in Qatar, the Maersk Oil assets, Waha in Libya, and Lapa and Iara in Brazil, which were partially offset by the expiration of the Mahakam permit in Indonesia at the end of 2017;
-3% due to heavier seasonal maintenance activity, the PSC price effect and natural field decline.

 

  Results
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  in millions of dollars  1H18  1H17  1H18 vs
1H17
 3,398    2,467    2,068    +64%  Non-Group sales   5,865    4,171    +41%
 3,773    2,996    1,295    x3   Operating income   6,769    1,191    x5.7 
 569    641    487    +17%  Net income (loss) from equity affiliates and other items   1,210    677    +79%
 46.3%   48.1%   36.2%       Effective tax rate*   47.1%   39.3%     
 (1,772)   (1,550)   (512)   x3.5   Tax on net operating income   (3,322)   (951)   x3.5 
 2,570    2,087    1,270    x2   Net operating income   4,657    917    x5.1 
 117    96    89    +31%  Adjustments affecting net operating income   213    1,824    -88%
 2,687    2,183    1,359    +98%  Adjusted net operating income**   4,870    2,741    +78%
 575    446    373    +54%  • Including income from equity affiliates   1,021    688    +48%
 2,980    5,871    3,448    -14%  Investments   8,851    6,084    +45%
 500    2,251    132    x3.8   Divestments   2,751    245    x11.2 
 2,114    2,057    3,296    -36%  Organic investments   4,171    5,802    -28%

 

 

 

* “Effective tax rate” = tax on adjusted net operating income / (adjusted net operating income - income from equity affiliates - dividends received from investments - impairment of goodwill + tax on adjusted net operating income).
** Detail of adjustment items shown in the business segment information starting on page 35 of this exhibit.

 

The Exploration & Production segment’s adjusted net operating income was:

 

  $2,687 million in the second quarter 2018, or practically double the second quarter 2017. The Group benefited fully from the increase in hydrocarbon prices, thanks to higher production and lower costs, despite an increase in tax rates over the year to 46.3% in line with increasing hydrocarbon prices.
  $4,870 million in the first half 2018, an increase of 78% compared to the first half 2017, for the same reasons.

 

Adjusted net operating income for the Exploration & Production segment excludes special items. In the second quarter of 2018, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $117 million compared to a positive impact of $89 million in the second quarter of 2017.

 

The segment’s cash flow from operating activities excluding financial charges was $4,628 million in the second quarter of 2018, an increase of 63% compared to $2,836 million in the second quarter of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the second quarter of 2018 was $5,115 million, an increase of 43% compared to $3,580 million in the second quarter of 20172, as a result of the increase in hydrocarbon prices, thanks to higher production and lower costs. The Exploration & Production segment generated $5,209 million of cash flow after organic investments in the first half 2018.

 

 

 

1 The PSC “price effect” refers to the impact of changing hydrocarbon prices on entitlement volumes from production sharing and buyback contracts. For example, as the price of oil or gas increases above certain pre-determined levels, TOTAL’s share of production normally decreases.

2 Operating cash flow excluding the change in working capital at replacement cost provides information on underlying cash flow without the short-term impacts of changes in inventory and other working capital elements at replacement cost. For information on the replacement cost method, refer to “B. Analysis of business segment results”, above. The reconciliation table for different cash flow figures is set forth under “Cash Flow” on page 12 of this exhibit.

3

In the first half of 2018, the segment’s cash flow from operating activities excluding financial charges was $8,197 million, an increase of 45% compared to $5,637 million in the first half of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the first half of 2018 was $9,380 million, an increase of 36% compared to $6,916 million in the first half of 2017, thanks to the same reasons mentioned in the paragraph above.

 

  B.2. Gas, Renewables & Power segment
     
  Results
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  in millions of dollars  1H18  1H17  1H18 vs
1H17
 3,268    4,091    2,671    +22%  Non-Group sales   7,359    5,868    +25%
 (336)   (37)   48    n/a   Operating income   (373)   13    n/a 
 128    34    13    x9.8   Net income (loss) from equity affiliates and other items   162    (32)   n/a 
 (19)   (15)   (24)   -21%  Tax on net operating income   (34)   (61)   -44%
 (227)   (18)   37    n/a   Net operating income   (245)   (80)   x3.1 
 420    133    58    x7.2   Adjustments affecting net operating income   553    236    x2.3 
 193    115    95    +103%  Adjusted net operating income*   308    156    +97%
 79    249    77    +3%  Investments   328    392    -16%
 405    78    23    x17.6   Divestments   483    27    x17.9 
 60    77    68    -12%  Organic investments   136    170    -20%

 

 

 

*Detail of adjustment items shown in the business segment information starting on page 35 of this exhibit.

 

Adjusted net operating income for the Gas, Renewables & Power segment was $193 million in the second quarter 2018 and $308 million in the first half 2018, thanks to an increased contribution from the gas business and better performance from new energies, compared to $95 million in the second quarter 2017 and $156 million in the first half 2017.

 

Adjusted net operating income for the Gas, Renewables & Power segment excludes special items. In the second quarter of 2018, the exclusion of special items had a positive impact on the segment’s adjusted net operating income of $420 million compared to a positive impact of $58 million in the second quarter of 2017.

 

The segment’s cash flow from operating activities excluding financial charges was $104 million in the second quarter of 2018, compared to $(100) million in the second quarter of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the second quarter of 2018 was $177 million, an increase of 43% compared to 124 million in the second quarter of 2017.

 

In the first half of 2018, the segment’s cash flow from operating activities excluding financial charges was $(75) million compared to $40 million in the first half of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the first half of 2018 was $226 million, an increase of 42% compared to 159 million in the first half of 2017.

4
  B.3. Refining & Chemicals segment
     
  Refinery throughput and utilization rates*
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
     1H18  1H17  1H18 vs
1H17
 1,734    1,832    1,672    +4%  Total refinery throughput (kb/d)   1,784    1,796    -1%
 569    624    574    -1%  • France   597    600    -1%
 670    746    684    -2%  • Rest of Europe   708    742    -5%
 495    462    414    +20%  • Rest of world   479    454    +6%
 83%   87%   81%       Utilization rates based on crude only**   85%   86%     

 

 

 

* Includes share of TotalErg, as well as refineries in Africa that are reported in the Marketing & Services segment.
** Based on distillation capacity at the beginning of the year.  

 

Refinery throughput:

 

  increased by 4% in the second quarter 2018 compared to the second quarter 2017, notably as a result of higher throughput at SATORP after debottlenecking increased its capacity by more than 10%.
  was stable in the first half 2018 compared to the first half 2017. Lower throughput in Europe linked to planned maintenance, notably at Antwerp, was offset by higher throughput in the rest of the world.
     
  Results
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  in millions of dollars, except the
ERMI
  1H18  1H17  1H18 vs
1H17
 34.7    25.6    41.0    -15%  European refining margin indicator - ERMI ($/t)   30.1    40.0    -25%
 23,349    21,739    17,347    +35%  Non-Group sales   45,088    35,921    +26%
 1,249    656    520    x2.4   Operating income   1,905    1,574    +21%
 289    128    148    +95%  Net income (loss) from equity affiliates and other items   417    2,601    -84%
 (279)   (104)   (142)   +96%  Tax on net operating income   (383)   (498)   -23%
 1,259    680    526    x2.4   Net operating income   1,939    3,677    -47%
 (438)   40    335    n/a   Adjustments affecting net operating income   (398)   (1,793)   -78%
 821    720    861    -5%  Adjusted net operating income*   1,541    1,884    -18%
 404    332    401    +1%  Investments   736    667    +10%
 324    25    20    x16.2   Divestments   349    2,760    -87%
 386    308    381    +1%  Organic investments   694    603    +15%

 

 

 

*Detail of adjustment items shown in the business segment information starting on page 35 of this exhibit.

 

The Group’s European refining margin indicator (ERMI) decreased by 15% from a year ago to $34.7/t in the second quarter 2018, and it decreased by 25% from a year ago to $30.1/t for the first half 2018. Petrochemical margins continue to benefit from a favorable environment, notably in the United States and Asia-Middle East, but margins in Europe were lower compared to a year ago mainly due to an increase in feedstock prices.

 

In this context, adjusted net operating income for the Refining & Chemicals segment was:

$821 million in the second quarter 2018, a decrease of 5% compared to the second quarter 2017.
$1,541 million in the first half 2018, a decrease of 18% compared to the first half 2017.

 

Adjusted net operating income for the Refining & Chemicals segment excludes any after-tax inventory valuation effect and special items. In the second quarter of 2018, the exclusion of the inventory valuation effect had a negative impact on the segment’s adjusted net operating income of $438 million compared to a positive impact of $270 million in the second quarter of 2017. The exclusion of special items in the second quarter of 2018 had a neutral impact on the segment’s adjusted net operating income compared to a positive impact of $65 million in the second quarter of 2017.

5

The segment’s cash flow from operating activities excluding financial charges was $999 million in the second quarter of 2018, a decrease of 49% compared to $1,967 million in the second quarter of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the second quarter of 2018 was $1,018 million, a decrease of 24% compared to 1,347 million in the second quarter of 2017.

 

In the first half of 2018, the segment’s cash flow from operating activities excluding financial charges was $(110) million compared to $3,729 million in the first half of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the first half of 2018 was $1,938 million, a decrease of 19% compared to 2,378 million in the first half of 2017.

 

  B.4. Marketing & Services segment
     
  Petroleum product sales
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  sales in kb/d*  1H18  1H17  1H18 vs
1H17
 1,799    1,801    1,760    +2%  Total Marketing & Services sales   1,800    1,744    +3%
 1,001    993    1,039    -4%  • Europe   997    1,039    -4%
 798    808    721    +11%  • Rest of world   803    705    +14%

 

 

 

*Excludes trading and bulk refining sales, which are reported under the Refining & Chemicals segment (see page 11 of this exhibit); includes share of TotalErg.

 

Petroleum product sales:

increased by 2% in the second quarter 2018 compared to the second quarter 2017, despite the sale of TotalErg in Italy, due to growth in the business, notably in Asia and Africa.
increased by 3% in the first half 2018 compared to the first half 2017 for the same reasons.

 

  Results
     
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  in millions of dollars  1H18  1H17  1H18 vs
1H17
 22,528    21,308    17,831    +26%  Non-Group sales   43,836    35,129    +25%
 662    357    360    +84%  Operating income   1,019    734    +39%
 107    86    258    -59%  Net income (loss) from equity affiliates and other items   193    288    -33%
 (194)   (103)   (123)   +58%  Tax on net operating income   (297)   (231)   +29%
 575    340    495    +16%  Net operating income   915    791    +16%
 (97)   27    (62)   -56%  Adjustments affecting net operating income   (70)   (57)   +23%
 478    367    433    +10%  Adjusted net operating income*   845    734    +15%
 310    228    258    +20%  Investments   538    697    -23%
 45    228    182    -75%  Divestments   273    218    +25%
 205    136    185    +11%  Organic investments   342    280    +22%

 

 

 

*Detail of adjustment items shown in the business segment information starting on page 35 of this exhibit.

 

Adjusted net operating income for the Marketing & Services segment was:

$478 million in the second quarter 2018, an increase of 10% compared to the second quarter 2017, due to volume growth in a context of favorable margins, notably in Africa.
$845 million in the first half 2018, a 15% increase compared to the first half 2017, for the same reasons.

 

Adjusted net operating income for the Marketing & Services segment excludes any after-tax inventory valuation effect and special items. In the second quarter of 2018, the exclusion of the inventory valuation effect had a negative impact on the segment’s adjusted net operating income of $97 million compared to a positive impact of $45 million in the second quarter of 2017. The exclusion of special items in the second quarter of 2018 had a neutral impact on the segment’s adjusted net operating income compared to a negative impact of $107 million in the second quarter of 2017.

 

The segment’s cash flow from operating activities excluding financial charges was $841 million in the second quarter of 2018, 3.4 times more compared to $251 million in the second quarter of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the second quarter of 2018 was $646 million, an increase of 4% compared to $624 million in the second quarter of 2017.

6

In the first half of 2018, the segment’s cash flow from operating activities excluding financial charges was $781 million, an increase of 34% compared to $582 million in the first half of 2017. Operating cash flow in the first half of 2018 excluding the change in working capital at replacement cost and without financial charges was $1,076 million, an increase of 2% compared to $1,053 million in the first half of 2017.

 

C. GROUP RESULTS
   
  Net income (Group share)

 

Net income (Group share) was $3,721 million in the second quarter of 2018, an increase of 83% compared to $2,037 million in the second quarter of 2017, and $6,357 million in the first half of 2018, an increase of 30% compared to $4,886 million in the first half of 2017.

 

Adjusted net income (Group share) was:

 

$3,553 million in the second quarter 2018, an increase of 44% compared to the second quarter 2017, essentially due to 52% increase in the contribution of the segments, partially offset by higher net cost of net debt, mainly due to an increase in U.S. dollar interest rates.
   
$6,437 million in the first half 2018, a 28% increase compared to the first half 2017 for the same reasons.

 

Adjusted net income excludes the after-tax inventory effect, special items and the impact of changes in fair value3.

 

Total adjustments affecting net income (Group share)4 were:

 

$168 million in the second quarter 2018.
   
-$80 million in the first half 2018.

 

  Fully-diluted shares and share buyback

 

On June 30, 2018, the number of fully-diluted shares was 2,644 million, compared to 2,503 million on June 30, 2017.

 

Within the framework of the shareholder return policy announced in February 2018, the Group bought back shares in the first half 2018 for cancellation. The buyback is comprised of repurchasing shares issued as scrip dividend to eliminate dilution and additional shares to share with shareholders the benefit resulting from higher oil prices.

 

18.6 million shares repurchased in the second quarter 2018, including additional shares for $299 million.
   
28.4 million shares repurchased in the first half 2018, including additional shares for $589 million.

 

  Divestments — acquisitions

 

Asset sales were:

$693 million completed in the second quarter 2018, comprised mainly of SunPower’s sale of its interest in 8point3, and the sale of the Bayport (US) polyethylene plant to the joint venture formed with Borealis and Nova in which Total holds 50%, compared to $207 million in the second quarter of 2017.
$2,862 million completed in the first half 2018, comprised mainly of the items above plus the high-cost Martin Linge field in Norway, an interest in Fort Hills in Canada and the marketing activities of TotalErg in Italy, compared to 2,918 million in the first half of 2017.

 

Acquisitions were:

$426 million completed in the second quarter 2018, comprised mainly of offshore assets from Cobalt in the Gulf of Mexico, notably including 20% interest in the North Platte and Anchor discoveries, and an interest in Clean Energy in the United States to expand into marketing natural gas for vehicles.
$4,114 million completed in the first half 2018, comprised mainly of the items above plus interests in the Iara and Lapa fields in Brazil, two new 40-year concessions in offshore Abu Dhabi, and the Waha field in Libya.

 

 

 

3 Details shown on page 12 of this exhibit.

4 Details shown on pages 12 of this exhibit.

7
  Cash flow

 

The Group’s cash flow from operating activities was $6,246 million in the second quarter of 2018, an increase of 35% compared to $4,640 million in the second quarter of 2017. The change in working capital at replacement cost in the second quarter of 2018, which is the (increase)/decrease in working capital of $(856) million as determined in accordance with IFRS adjusted for the pre-tax inventory valuation effect of $703 million, was $(153) million compared to $(694) million in the second quarter of 2017. Operating cash flow excluding the change in working capital at replacement cost in the second quarter of 2018 was $6,399 million, an increase of 20% compared to $5,334 million in the second quarter of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the second quarter of 2018 was $6,797 million, an increase of 22% compared to $5,581 million in the second quarter of 2017.

 

The Group’s net cash flow5 was $3,886 million in the second quarter 2018 compared to $1,489 million in the second quarter 2017, thanks mainly to a 20% increase in operating cash flow before working capital changes.

 

In the first half of 2018, the Group’s cash flow from operating activities was $8,327 million, a decrease of 11% compared to $9,341 million in the first half of 2017. The change in working capital at replacement cost in the first half of 2018, which is the (increase)/decrease in working capital of $(4,078) million as determined in accordance with IFRS adjusted for the pre-tax inventory valuation effect of $636 million, was $(3,442) million compared to $(680) million in the first half of 2017. Operating cash flow excluding the change in working capital at replacement cost in the first half of 2018 was $11,769 million, an increase of 17% compared to $10,021 million in the first half of 2017. Operating cash flow excluding the change in working capital at replacement cost and without financial charges in the first half of 2018 was $12,465 million, an increase of 19% compared to $10,483 million in the first half of 2017.The Group’s net cash flow was $5,117 million in the first half 2018 compared to $5,396 million in the first half 2017. Net investments increased by $2,027 million compared to the first half 2017 due to an increase in completed acquisitions, in line with the strategy of the Group to invest counter-cyclically in 2016-17. This well-timed investment effort was partially offset by a $1,748 million increase in operating cash flow before working capital changes.

 

D. PROFITABILITY

 

Return on equity for the twelve months ended June 30, 2018, was 10.9%, an increase compared to the same period a year ago.

 

in millions of dollars  07/01/2017 -
06/30/2018
  04/01/2017 -
03/31/2018
  01/01/2017-
12/31/2017
Adjusted net income   12,299    11,150    10,762 
Adjusted shareholders’ equity   113,251    111,522    106,078 
Return on equity (ROE)   10.9%   10.0%   10.1%

 

Return on average capital employed was 10.1% for the twelve months ended June 30, 2018, an increase compared to the same period a year ago.

 

in millions of dollars  07/01/2017 -
06/30/2018
  04/01/2017 -
03/31/2018
  01/01/2017-
12/31/2017
Adjusted net operating income   13,748    12,428    11,958 
Adjusted capital employed   136,356    136,384    125,575 
ROACE   10.1%   9.1%   9.4%

 

 

 

5 Net cash flow = operating cash flow before working capital changes - net investments (including other transactions with non-controlling interests).

8

E. 2018 SENSITIVITIES*

 

   Scenario retained  Change  Estimated impact
on adjusted net
operating income
  Estimated
impact on cash
flow
Dollar  $1.2/€  +/- $0.1 per €  -/+ $0.1 B  ~$0 B
Brent  $50/b  +/- $10/b**  +/- $2.3 B  +/- $2.8 B
European refining margin indicator (ERMI)  $35/t  +/- $10/t  +/- $0.5 B  +/- $0.6 B

 

 

 

* Sensitivities are revised once per year upon publication of the previous year’s fourth quarter results. Sensitivities are estimates based on assumptions about the Group’s portfolio in 2018. Actual results could vary significantly from estimates based on the application of these sensitivities. The impact of the $-€ sensitivity on adjusted net operating income is essentially attributable to Refining & Chemicals.

**Assumes constant liquids price differentials.

 

F. SUMMARY AND OUTLOOK

 

Supported by inventory reductions and geopolitical tensions, Brent continued to trade at around $70/b at the start of the third quarter, despite the announced increase in production by OPEC. The Group, however, resolutely continues to implement programs to improve operational efficiency and to reduce its breakeven so as to remain profitable whatever the market context.

 

The Upstream is well positioned to take advantage of the increase in oil prices thanks to production growth which should be above 7% in 2018. It will benefit in the coming months from the start-ups of Kaombo, Tempa Rossa, Ichthys and Egina, which are all strong cash flow generators, as well as ramping production up at recent start-ups like Yamal LNG, Fort Hills and Timimoun.

 

Since the start of the third quarter, European refining margins have been around $35/t. While still favorable, petrochemical margins are lower in Europe compared to a year ago.

 

The cost reduction program is on track to surpass the $4 billion objective for the year and reach $4.2 billion of cost savings over the 2014-18 period. The Group confirms that investments (organic and net acquisitions) should be between $16-17 billion in 2018.

 

Conforming to the announced shareholder return policy, the Group will continue to buy back shares issued as scrip dividend to eliminate dilution. It will also continue to buy back additional shares for an amount of up to $5 billion over the period 2018-20.

9

FORWARD-LOOKING STATEMENTS

 

This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of the management of TOTAL and on the information currently available to such management. Forward-looking statements include information concerning forecasts, projections, anticipated synergies, and other information concerning possible or assumed future results of TOTAL, and may be preceded by, followed by, or otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “plans”, “targets”, “estimates” or similar expressions.

 

Forward-looking statements are not assurances of results or values. They involve risks, uncertainties and assumptions. TOTAL’s future results and share value may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond TOTAL’s ability to control or predict. Except for its ongoing obligations to disclose material information as required by applicable securities laws, TOTAL does not have any intention or obligation to update forward-looking statements after the distribution of this document, even if new information, future events or other circumstances have made them incorrect or misleading.

 

You should understand that various factors, certain of which are discussed elsewhere in this document and in the documents referred to in, or incorporated by reference into, this document, could affect the future results of TOTAL and could cause results to differ materially from those expressed in such forward-looking statements, including:

 

  material adverse changes in general economic conditions or in the markets served by TOTAL, including changes in the prices of oil, natural gas, refined products, petrochemical products and other chemicals;
  changes in currency exchange rates and currency devaluations;
  the success and the economic efficiency of oil and natural gas exploration, development and production programs, including without limitation, those that are not controlled and/or operated by TOTAL;
  uncertainties about estimates of changes in proven and potential reserves and the capabilities of production facilities;
  uncertainties about the ability to control unit costs in exploration, production, refining and marketing (including refining margins) and chemicals;
  changes in the current capital expenditure plans of TOTAL;
  the ability of TOTAL to realize anticipated cost savings, synergies and operating efficiencies;
  the financial resources of competitors;
  changes in laws and regulations, including tax and environmental laws and industrial safety regulations;
  the quality of future opportunities that may be presented to or pursued by TOTAL;
  the ability to generate cash flow or obtain financing to fund growth and the cost of such financing and liquidity conditions in the capital markets generally;
  the ability to obtain governmental or regulatory approvals;
  the ability to respond to challenges in international markets, including political or economic conditions, including international armed conflict, and trade and regulatory matters;
  the ability to complete and integrate appropriate acquisitions, strategic alliances and joint ventures;
  changes in the political environment that adversely affect exploration, production licenses and contractual rights or impose minimum drilling obligations, price controls, nationalization or expropriation, and regulation of refining and marketing, chemicals and power generating activities;
  the possibility that other unpredictable events such as labor disputes or industrial accidents will adversely affect the business of TOTAL; and
  the risk that TOTAL will inadequately hedge the price of crude oil or finished products.

 

For additional factors, you should read the information set forth under “Item 3. -3.2 Risk Factors”, “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk” in TOTAL’s Form 20-F for the year ended December 31, 2017.

10

OPERATING INFORMATION BY SEGMENT

 

Exploration & Production
   
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  Combined liquids and gas production by region (kboe/d)  1H18  1H17  1H18 vs
1H17
 842    886    746    +13%  Europe and Central Asia   864    776    +11%
 672    673    656    +2%  Africa   673    646    +4%
 681    639    514    +33%  Middle East and North Africa   660    524    +26%
 401    371    344    +17%  Americas   386    339    +14%
 121    134    240    -49%  Asia-Pacific   128    249    -49%
                                             
 2,717    2,703    2,500    +9%  Total production   2,710    2,534    +7%
                                             
 616    724    597    +3%  • Including equity affiliates   670    621    +8%
                                    
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  Liquids production by region (kb/d)  1H18  1H17  1H18 vs
1H17
 332    299    266    +25%  Europe and Central Asia   315    268    +17%
 511    503    505    +1%  Africa   507    495    +2%
 539    501    376    +43%  Middle East and North Africa   520    384    +36%
 190    165    126    +51%  Americas   177    126    +41%
 11    13    26    -58%  Asia-Pacific   12    28    -57%
                                             
 1,582    1,481    1,298    +22%  Total production   1,532    1,300    +18%
                                             
 233    304    244    -5%  • Including equity affiliates   268    254    +6%
                                    
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  Gas production by region (Mcf/d)  1H18  1H17  1H18 vs
1H17
 2,754    3,157    2,592    +6%  Europe and Central Asia   2,954    2,740    +8%
 772    857    679    +14%  Africa   815    696    +17%
 787    761    763    +3%  Middle East and North Africa   774    776    - 
 1,192    1,158    1,223    -3%  Americas   1,175    1,197    -2%
 671    731    1,243    -46%  Asia-Pacific   701    1,287    -46%
                                             
 6,176    6,664    6,500    -5%  Total production   6,419    6,696    -4%
                                             
 2,026    2,257    1,829    +11%  • Including equity affiliates   2,141    1,921    +11%
                                    
2Q18  1Q18  2Q17  2Q18 vs
2Q17
  Liquefied natural gas  1H18  1H17  1H18 vs
1H17
 2.47    2.50    2.67    -7%  LNG sales* (Mt)   4.97    5.66    -12%

 

 

 

* Sales, Group share, excluding trading; 2017 data restated to reflect volume estimates for Bontang LNG in Indonesia based on the 2017 SEC coefficient.

 

Downstream (Refining & Chemicals and Marketing & Services)
   
2Q18  1Q18  2Q17*  2Q18 vs
2Q17
  Petroleum product sales by region (kb/d)**  1H18  1H17*  1H18 vs
1H17
 1,942    1,902    2,020    -4%  Europe   1,922    2,078    -7%
 652    754    610    +7%  Africa   703    587    +20%
 802    760    654    +23%  Americas   781    615    +27%
 644    680    774    -17%  Rest of world   662    765    -14%
 4,040    4,096    4,057    -   Total consolidated sales   4,068    4,045    +1%
 556    570    538    +3%  • Including bulk sales   563    577    -2%
 1,685    1,725    1,759    -4%  • Including trading   1,705    1,724    -1%

 

 

 

* 2017 data restated.

** Includes share of TotalErg.

11

ADJUSTMENT ITEMS

 

Adjustment items to net income (Group share)
   
2Q18  1Q18  2Q17  in millions of dollars  1H18  1H17
 (358)   (195)   (108)  Special items affecting net income (Group share)   (553)   128 
                          
 (2)   (101)   125   • Gain (loss) on asset sales   (103)   2,264 
 (46)   (21)   (54)  • Restructuring charges   (67)   (59)
 (236)   (12)   (32)  • Impairments   (248)   (1,750)
 (74)   (61)   (147)  • Other   (135)   (327)
                          
 517    (45)   (310)  After-tax inventory effect: FIFO vs. replacement cost   472    (255)
                          
 9    (8)   (19)  Effect of changes in fair value   1    (19)
                          
 168    (248)   (437)  Total adjustments affecting net income   (80)   (146)

 

INVESTMENTS — DIVESTMENTS

 

2Q18  1Q18  2Q17  2Q18 vs
2Q17
  in millions of dollars  1H18  1H17  1H18 vs
1H17
 2,780    2,620    3,949    -30%  Organic investments   5,400    6,893    -22%
                                    
 137    111    166    -17%  • Capitalized exploration   248    277    -10%
 140    171    443    -68%  • Increase in non-current loans   311    601    -48%
 (581)   (416)   (153)   x3.8   • Repayment of non-current loans   (997)   (340)   x2.9 
                                    
 426    3,688    103    x4.1   Acquisitions   4,114    650    x6.3 
                                    
 693    2,169    207    x3.3   Asset sales   2,862    2,918    -2%
                                    
                Other transactions with non-controlling interests            
                                    
 2,513    4,139    3,845    -35%  Net investments   6,652    4,625    +44%

 

CASH FLOW

 

2Q18  1Q18  2Q17  2Q18 vs
2Q17
  in millions of dollars  1H18  1H17  1H18 vs
1H17
 6,797    5,668    5,581    +22%  Operating cash flow before working capital changes w/o financial charges (DACF)   12,465    10,483    +19%
 (398)   (298)   (247)   +61%  • Financial charges   (696)   (462)   +51%
 6,399    5,370    5,334    +20%  Operating cash flow before working capital changes (a)  11,769    10,021    +17%
 (856)   (3,222)   (268)   n/a   • (Increase) decrease in working capital   (4,078)   (322)   n/a 
 703    (67)   (426)   n/a   • Inventory effect   636    (358)   n/a 
 6,246    2,081    4,640    +35%  Cash flow from operations   8,327    9,341    -11%
                                    
 2,780    2,620    3,949    -30%  Organic investments (b)   5,400    6,893    -22%
 3,619    2,750    1,385    x2.6   Free cash flow after organic investments, w/o net asset sales (a-b)   6,369    3,128    x2 
                                    
 2,513    4,139    3,845    -35%  Net investments (c)   6,652    4,625    +44%
 3,886    1,231    1,489    x2.6   Net cash flow (a-c)   5,117    5,396    -5%
12

GEARING RATIOS

 

in millions of dollars  06/30/2018  03/31/2018  06/30/2017
Current borrowings   15,659    14,909    13,070 
Net current financial assets   (2,806)   (1,920)   (3,377)
Net financial assets classified as held for sale   0    0    (2)
Non-current financial debt   38,362    40,257    41,548 
Hedging instruments of non-current debt   (967)   (1,154)   (558)
Cash and cash equivalents   (26,475)   (30,092)   (28,720)
                
Net debt (a)   23,773    22,000    21,961 
                
Shareholders’ equity – Group share   117,975    121,187    107,188 
Non-controlling interests   2,288    2,499    2,772 
                
Shareholders’ equity (b)   120,263    123,686    109,960 
                
Net-debt-to-equity ratio = a/b   19.8%   17.8%   20.0%
Net-debt-to-capital ratio = a/(a+b)   16.5%   15.1%   16.6%

 

RETURN ON AVERAGE CAPITAL EMPLOYED

 

Twelve months ended June 30, 2018
   
in millions of dollars  Exploration &
Production
  Gas, Renewables
& Power
  Refining &
Chemicals
  Marketing
& Services
Adjusted net operating income   8,114    637    3,447    1,787 
Capital employed at 06/30/2017*   108,618    5,363    10,957    6,937 
Capital employed at 06/30/2018*   118,715    4,442    12,939    7,040 
                     
ROACE   7.1%   13.0%   28.9%   25.6%
   
Twelve months ended March 31, 2018
   
in millions of dollars  Exploration &
Production
  Gas, Renewables
& Power
  Refining &
Chemicals
  Marketing
& Services
Adjusted net operating income   6,786    539    3,487    1,742 
Capital employed at 03/31/2017*   106,937    5,036    11,130    6,331 
Capital employed at 03/31/2018*   119,035    5,237    13,428    7,409 
                     
ROACE   6.0%   10.5%   28.4%   25.4%
   
Twelve months ended June 30, 2017
   
in millions of dollars  Exploration &
Production
  Gas, Renewables
& Power
  Refining &
Chemicals
  Marketing
& Services
Adjusted net operating income   4,529    479    3,931    1,584 
Capital employed at 06/30/2016*   107,405    4,622    12,249    5,789 
Capital employed at 06/30/2017*   108,618    5,363    10,957    6,937 
                     
ROACE   4.2%   9.6%   33.9%   24.9%

 

 

 

* At replacement cost (excluding after-tax inventory effect).

13

MAIN INDICATORS

 

Chart updated around the middle of the month following the end of each quarter.

 

   €/$  Brent ($/b)  Average liquids
price*** ($/b)
  Average gas
price
($/Mbtu)***
  ERMI*  ($/t)**
Second quarter 2018   1.19    74.4    69.5    4.49    34.7 
First quarter 2018   1.23    66.8    60.4    4.73    25.6 
Fourth quarter 2017   1.18    61.3    57.6    4.23    35.5 
Third quarter 2017   1.17    52.1    48.9    4.05    48.2 
Second quarter 2017   1.10    49.6    45.1    3.93    41.0 

 

 

 

  *   European Refining Margin Indicator (“ERMI”) is a Group indicator intended to represent the margin after variable costs for a hypothetical complex refinery located around Rotterdam in Northern Europe that processes a mix of crude oil and other inputs commonly supplied to this region to produce and market the main refined products at prevailing prices in this region. The indicator margin may not be representative of the actual margins achieved by the Group in any period because of the Group’s particular refinery configurations, product mix effects or other company-specific operating conditions.
  ** $1/t = $0.136/b.
  ***   Consolidated subsidiaries, excluding fixed margin contracts, including hydrocarbon production overlifting/underlifting position valued at market price

 

Disclaimer: data is based on TOTAL’s reporting, is not audited and is subject to change.

14

Consolidated statement of income – half-yearly

 

TOTAL

 

(unaudited)

 

 

(M$)(a)  1st half
2018
  1st half
2017
           
Sales   102,151   81,098 
Excise taxes   (12,757)   (10,523)
Revenues from sales   89,394    70,575 
Purchases, net of inventory variation   (60,045)   (47,385)
Other operating expenses   (13,698)   (12,272)
Exploration costs   (362)   (396)
Depreciation, depletion and impairment of tangible assets and mineral interests   (6,351)   (7,377)
Other income   775    2,895 
Other expense   (603)   (397)
Financial interest on debt   (868)   (676)
Financial income and expense from cash & cash equivalents   (95)   (48)
Cost of net debt   (963)   (724)
Other financial income   561    513 
Other financial expense   (329)   (319)
Net income (loss) from equity affiliates   1,587    858 
Income taxes   (3,683)   (1,165)
Consolidated net income   6,283    4,806 
Group share   6,357    4,886 
Non-controlling interests   (74)   (80)
Earnings per share ($)   2.39    1.93 
Fully-diluted earnings per share ($)   2.38    1.92 
(a) Except for per share amounts.          
15

Consolidated statement of comprehensive income – half-yearly

 

TOTAL

 

(unaudited)

 

(M$)  1st half
2018
  1st half
2017
Consolidated net income   6,283    4,806 
Other comprehensive income          
Actuarial gains and losses   67    158 
Change in fair value of investments in equity instruments   5     
Tax effect   (18)   (53)
Currency translation adjustment generated by the parent company   (2,630)   5,464 
Items not potentially reclassifiable to profit and loss   (2,576)   5,569 
Currency translation adjustment   968    (1,418)
Available for sale financial assets        
Cash flow hedge   255    34 
Variation of foreign currency basis spread   (27)    
Share of other comprehensive income of equity affiliates, net amount   (132)   (463)
Other   (2)    
Tax effect   (75)   (9)
Items potentially reclassifiable to profit and loss   987    (1,856)
Total other comprehensive income (net amount)   (1,589)   3,713 
Comprehensive income   4,694    8,519 
Group share   4,806    8,581 
Non-controlling interests   (112)   (62)
16

Consolidated statement of income – quarterly

 

TOTAL

 

(unaudited)

 

(M$)(a)  2 nd quarter
2018
  1 st quarter
2018
  2 nd quarter
2017
Sales   52,540    49,611    39,915 
Excise taxes   (6,438)   (6,319)   (5,433)
Revenues from sales   46,102    43,292    34,482 
Purchases, net of inventory variation   (30,599)   (29,446)   (23,398)
Other operating expenses   (6,761)   (6,937)   (6,106)
Exploration costs   (158)   (204)   (199)
Depreciation, depletion and impairment of tangible assets and mineral interests   (3,435)   (2,916)   (2,798)
Other income   252    523    570 
Other expense   (413)   (190)   (106)
Financial interest on debt   (478)   (390)   (345)
Financial income and expense from cash & cash equivalents   (54)   (41)   (37)
Cost of net debt   (532)   (431)   (382)
Other financial income   321    240    285 
Other financial expense   (159)   (170)   (159)
Net income (loss) from equity affiliates   1,103    484    310 
Income taxes   (2,087)   (1,596)   (472)
Consolidated net income   3,634    2,649    2,027 
Group share   3,721    2,636    2,037 
Non-controlling interests   (87)   13    (10)
Earnings per share ($)   1.38    1.00    0.79 
Fully-diluted earnings per share ($)   1.38    0.99    0.79 
                
(a) Except for per share amounts.               
17

Consolidated statement of comprehensive income – quarterly

 

TOTAL

 

(unaudited)

 

(M$)  2nd quarter
2018
  1st quarter
2018
  2nd quarter
2017
Consolidated net income   3,634    2,649    2,027 
Other comprehensive income               
Actuarial gains and losses   42    25    32 
Change in fair value of investments in equity instruments   (2)   7     
Tax effect   (20)   2    (12)
Currency translation adjustment generated by the parent company   (4,761)   2,131    4,524 
Items not potentially reclassifiable to profit and loss   (4,741)   2,165    4,544 
Currency translation adjustment   1,330    (362)   (1,218)
Available for sale financial assets           1 
Cash flow hedge   77    178    (79)
Variation of foreign currency basis spread   2    (29)    
Share of other comprehensive income of equity affiliates, net amount   36    (168)   (794)
Other   (2)       (3)
Tax effect   (27)   (48)   30 
Items potentially reclassifiable to profit and loss   1,416    (429)   (2,063)
Total other comprehensive income (net amount)   (3,325)   1,736    2,481 
Comprehensive income   309    4,385    4,508 
Group share   450    4,356    4,507 
Non-controlling interests   (141)   29    1 
18

Consolidated balance sheet

 

TOTAL

 

(M$)  June 30,
2018
  March 31,
2018
  December 31,
2017
  June 30,
2017
ASSETS  (unaudited)  (unaudited)     (unaudited)
Non-current assets                    
Intangible assets, net   24,562    24,502    14,587    14,119 
Property, plant and equipment, net   114,047    116,181    109,397    112,659 
Equity affiliates : investments and loans   22,443    22,332    22,103    21,705 
Other investments   1,396    1,710    1,727    1,483 
Non-current financial assets   967    1,154    679    558 
Deferred income taxes   5,348    5,519    5,206    4,981 
Other non-current assets   3,384    3,633    3,984    4,411 
Total non-current assets   172,147    175,031    157,683    159,916 
Current assets                    
Inventories, net   18,392    17,006    16,520    14,273 
Accounts receivable, net   16,974    17,774    14,893    12,923 
Other current assets   14,408    14,824    14,210    14,034 
Current financial assets   3,609    2,289    3,393    3,618 
Cash and cash equivalents   26,475    30,092    33,185    28,720 
Assets classified as held for sale           2,747    421 
Total current assets   79,858    81,985    84,948    73,989 
Total assets   252,005    257,016    242,631    233,905 
LIABILITIES & SHAREHOLDERS’ EQUITY                    
Shareholders’ equity                    
Common shares   8,305    8,207    7,882    7,797 
Paid-in surplus and retained earnings   121,896    120,559    112,040    110,305 
Currency translation adjustment   (9,764)   (6,413)   (7,908)   (10,314)
Treasury shares   (2,462)   (1,166)   (458)   (600)
Total shareholders’ equity - Group share   117,975    121,187    111,556    107,188 
Non-controlling interests   2,288    2,499    2,481    2,772 
Total shareholders’ equity   120,263    123,686    114,037    109,960 
Non-current liabilities                    
Deferred income taxes   11,969    11,943    10,828    10,920 
Employee benefits   3,329    3,796    3,735    4,127 
Provisions and other non-current liabilities   18,807    19,268    15,986    16,924 
Non-current financial debt   38,362    40,257    41,340    41,548 
Total non-current liabilities   72,467    75,264    71,889    73,519 
Current liabilities                    
Accounts payable   25,021    24,836    26,479    21,914 
Other creditors and accrued liabilities   17,792    17,952    17,779    14,862 
Current borrowings   15,659    14,909    11,096    13,070 
Other current financial liabilities   803    369    245    241 
Liabilities directly associated with the assets classified as held for sale           1,106    339 
Total current liabilities   59,275    58,066    56,705    50,426 
Total liabilities & shareholders’ equity   252,005    257,016    242,631    233,905 
19

Consolidated statement of cash flow

 

TOTAL

 

(unaudited)

 

(M$)  1st half
2018
  1st half
2017
CASH FLOW FROM OPERATING ACTIVITIES          
Consolidated net income   6,283    4,806 
Depreciation, depletion, amortization and impairment   6,554    7,590 
Non-current liabilities, valuation allowances and deferred taxes   149    (247)
(Gains) losses on disposals of assets   (273)   (2,383)
Undistributed affiliates’ equity earnings   (557)   206 
(Increase) decrease in working capital   (4,078)   (322)
Other changes, net   249    (309)
Cash flow from operating activities   8,327    9,341 
CASH FLOW USED IN INVESTING ACTIVITIES          
Intangible assets and property, plant and equipment additions   (9,178)   (6,001)
Acquisitions of subsidiaries, net of cash acquired   (714)   (325)
Investments in equity affiliates and other securities   (308)   (956)
Increase in non-current loans   (311)   (601)
Total expenditures   (10,511)   (7,883)
Proceeds from disposals of intangible assets and property, plant and equipment   2,282    80 
Proceeds from disposals of subsidiaries, net of cash sold   (4)   2,696 
Proceeds from disposals of non-current investments   584    142 
Repayment of non-current loans   997    340 
Total divestments   3,859    3,258 
Cash flow used in investing activities   (6,652)   (4,625)
CASH FLOW USED IN FINANCING ACTIVITIES          
Issuance (repayment) of shares:          
- Parent company shareholders   482    421 
- Treasury shares   (1,740)     
Dividends paid:          
- Parent company shareholders   (4,208)   (2,000)
- Non-controlling interests   (84)   (76)
Issuance of perpetual subordinated notes          
Payments on perpetual subordinated notes   (266)   (219)
Other transactions with non-controlling interests          
Net issuance (repayment) of non-current debt   (2,428)   346 
Increase (decrease) in current borrowings   969    (2,580)
Increase (decrease) in current financial assets and liabilities   (624)   1,637 
Cash flow used in financing activities   (7,899)   (2,471)
Net increase (decrease) in cash and cash equivalents   (6,224)   2,245 
Effect of exchange rates   (486)   1,878 
Cash and cash equivalents at the beginning of the period   33,185    24,597 
Cash and cash equivalents at the end of the period   26,475    28,720 
20

Consolidated statement of cash flow

 

TOTAL

 

(unaudited)

 

(M$)  2 nd quarter
2018
  1 st quarter
2018
  2 nd quarter
2017
CASH FLOW FROM OPERATING ACTIVITIES               
Consolidated net income   3,634    2,649    2,027 
Depreciation, depletion, amortization and impairment   3,508    3,046    2,930 
Non-current liabilities, valuation allowances and deferred taxes   35    114    (50)
(Gains) losses on disposals of assets   (148)   (125)   (151)
Undistributed affiliates’ equity earnings   (298)   (259)   501 
(Increase) decrease in working capital   (856)   (3,222)   (268)
Other changes, net   371    (122)   (349)
Cash flow from operating activities   6,246    2,081    4,640 
CASH FLOW USED IN INVESTING ACTIVITIES               
Intangible assets and property, plant and equipment additions   (3,513)   (5,665)   (3,323)
Acquisitions of subsidiaries, net of cash acquired   12    (726)   (6)
Investments in equity affiliates and other securities   (146)   (162)   (433)
Increase in non-current loans   (140)   (171)   (443)
Total expenditures   (3,787)   (6,724)   (4,205)
Proceeds from disposals of intangible assets and property, plant and equipment   304    1,978    74 
Proceeds from disposals of subsidiaries, net of cash sold   (7)   3      
Proceeds from disposals of non-current investments   396    188    133 
Repayment of non-current loans   581    416    153 
Total divestments   1,274    2,585    360 
Cash flow used in investing activities   (2,513)   (4,139)   (3,845)
CASH FLOW USED IN FINANCING ACTIVITIES               
Issuance (repayment) of shares:               
- Parent company shareholders   473    9    406 
- Treasury shares   (1,182)   (558)     
Dividends paid:               
- Parent company shareholders   (2,692)   (1,516)   (1,462)
- Non-controlling interests   (72)   (12)   (61)
Issuance of perpetual subordinated notes               
Payments on perpetual subordinated notes   (116)   (150)   (90)
Other transactions with non-controlling interests               
Net issuance (repayment) of non-current debt   52    (2,480)   290 
Increase (decrease) in current borrowings   (738)   1,707    (1,167)
Increase (decrease) in current financial assets and liabilities   (1,779)   1,155    979 
Cash flow used in financing activities   (6,054)   (1,845)   (1,105)
Net increase (decrease) in cash and cash equivalents   (2,321)   (3,903)   (310)
Effect of exchange rates   (1,296)   810    1,504 
Cash and cash equivalents at the beginning of the period   30,092    33,185    27,526 
Cash and cash equivalents at the end of the period   26,475    30,092    28,720 
21

Consolidated statement of changes in shareholders’ equity

 

TOTAL

 

(unaudited)

 

   Common shares issued  Paid-in
surplus and
  Currency   Treasury shares  Shareholders’  Non-  Total
(M$)  Number  Amount  retained
earnings
  translation
adjustment
  Number  Amount  equity - Group
Share
  controlling
interests
  shareholders’
equity
As of January 1, 2017   2,430,365,862    7,604    105,547    (13,871)   (10,587,822)   (600)   98,680    2,894    101,574 
Net income of the first half  2017           4,886                4,886    (80)   4,806 
Other comprehensive Income           138    3,557            3,695    18    3,713 
Comprehensive Income           5,024    3,557            8,581    (62)   8,519 
Dividend           (3,297)               (3,297)   (76)   (3,373)
Issuance of common shares   71,170,026    193    3,103                3,296        3,296 
Purchase of treasury shares                                    
Sale of treasury shares(a)                   4,000                 
Share-based payments           74                74        74 
Share cancellation                                    
Issuance of perpetual subordinated notes                                    
Payments on perpetual subordinated notes           (142)               (142)       (142)
Other operations with non-controlling interests           (7)               (7)   7     
Other items           3                3    9    12 
As of June 30,  2017   2,501,535,888    7,797    110,305    (10,314)   (10,583,822)   (600)   107,188    2,772    109,960 
Net income of the second half 2017           3,745                3,745    (252)   3,493 
Other comprehensive Income           580    2,406            2,986    26    3,012 
Comprehensive Income           4,325    2,406            6,731    (226)   6,505 
Dividend           (3,695)               (3,695)   (65)   (3,760)
Issuance of common shares   27,453,728    85    1,328                1,413        1,413 
Purchase of treasury shares                                    
Sale of treasury shares(a)           (142)       2,207,066    142             
Share-based payments           77                77        77 
Share cancellation                                    
Issuance of perpetual subordinated notes                                    
Payments on perpetual subordinated notes           (160)               (160)       (160)
Other operations with
non-controlling interests
           (1)               (1)   (3)   (4)
Other items           3                3    3    6 
As of December 31, 2017   2,528,989,616    7,882    112,040    (7,908)   (8,376,756)   (458)   111,556    2,481    114,037 
Net income of the first half 2018           6,357                6,357    (74)   6,283 
Other comprehensive Income           305    (1,856)           (1,551)   (38)   (1,589)
Comprehensive Income           6,662    (1,856)           4,806    (112)   4,694 
Dividend           (4,070)               (4,070)   (84)   (4,154)
Issuance of common shares   136,887,716    423    7,270                7,693        7,693 
Purchase of treasury shares                   (33,056,514)   (2,004)   (2,004)       (2,004)
Sale of treasury shares(a)                   3,450                 
Share-based payments           192                192        192 
Share cancellation                                    
Issuance of perpetual subordinated notes                                    
Payments on perpetual subordinated notes           (161)               (161)       (161)
Other operations with
non-controlling interests
           (4)               (4)   4     
Other items           (33)               (33)   (1)   (34)
As of June 30,  2018   2,665,877,332    8,305    121,896    (9,764)   (41,429,820)   (2,462)   117,975    2,288    120,263 
(a)Treasury shares related to the restricted stock grants. 
22

TOTAL

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FIRST SIX MONTHS OF 2018

 

(unaudited)

 

 

 

1) Accounting policies

 

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRS as published by the International Accounting Standards Board (IASB).

 

The interim consolidated financial statements of TOTAL S.A. and its subsidiaries (the Group) as of June 30, 2018, are presented in U.S. dollars and have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting”.

 

The accounting principles applied for the consolidated financial statements at June 30, 2018, are consistent with those used for the financial statements at December 31, 2017, with the exception of those texts or amendments that must be applied for periods beginning January 1, 2018.

 

- First-time application of IFRS 15 “Revenue from Contracts with Customers”

The Group applied IFRS 15 as of January 1, 2018, without restating comparative information from past periods. The cumulative effect of the first application of the standard, recognized in equity as at January 1, 2018, is non-material.

The new standard does not lead to any material change in the accounting principles applied by the Group.

 

- First time application of IFRS 9 “Financial Instruments”

The Group applied IFRS 9 as of January 1, 2018 without restating comparative information from past periods. The impacts related to the first application of the standard, recognized in opening equity at January 1, 2018, are not material.

 

This standard has three components: classification and measurement of financial instruments, impairment of financial assets, and hedging transactions except macro hedging.

 

The main changes induced by each component are the following:

 

1. The application of the “Classification and valuation of financial instruments” component led the Group to create a new non-recyclable component in its comprehensive income to record, from January 1, 2018, changes in the fair value of “Investments in equity instruments at the fair value through equity” previously classified as “Available-for-sale financial assets “under IAS 39.

 

2. The application of the “Impairment of financial assets” component has no significant impact for the Group on January 1, 2018.

 

3. The application of the “Hedging transactions” component led the Group to recognize in a separate component of the comprehensive income the changes in the Foreign Currency Basis Spread identified in the hedging relationships qualifying as a fair value hedge.

 

The application of the provisions of IFRS 9 “Financial Instruments” has no significant effect on the Group’s balance sheet, income statement and consolidated equity as of June 30, 2018.

 

The preparation of financial statements in accordance with IFRS for the closing as of June 30, 2018, requires the executive management to make estimates, assumptions and judgments that affect the information reported in the Consolidated Financial Statements and the Notes thereto.

 

These estimates, assumptions and judgments are based on historical experience and other factors believed to be reasonable at the date of preparation of the financial statements. They are reviewed on an on-going basis by the executive management and therefore could be revised as circumstances change or as a result of new information.

23

Different estimates, assumptions and judgments could significantly affect the information reported, and actual results may differ from the amounts included in the Consolidated Financial Statements and the Notes thereto.

 

The main estimates, judgments and assumptions relate to the estimation of hydrocarbon reserves in application of the successful efforts method for the oil and gas activities, the impairment of assets, the employee benefits, the asset retirement obligations and the income taxes. These estimates and assumptions are described in the Notes to the Consolidated Financial Statements as of December 31, 2017.

 

Furthermore, when the accounting treatment of a specific transaction is not addressed by any accounting standard or interpretation, the executive management applies its judgment to define and apply accounting policies that provide information consistent with the general IFRS concepts: faithful representation, relevance and materiality.

 

As regards the application of IFRS 16 “Leases” on January 1, 2019, the Group intends to:

 

-apply the simplified retrospective transition method, by accounting for the cumulative effect of the initial application of the standard at the date of first application, without restating the comparative periods
-use the following simplification measures provided by the standard in the transitional provisions:
onot apply the standard to contracts that the Group had not previously identified as containing a lease under IAS 17 and IFRIC 4,
onot take into account leases whose term ends within 12 months of the date of first application
-recognize each lease component of the lease as a separate lease, apart from non-lease components (services) of the lease.

24

2) Changes in the Group structure

 

2.1) Main acquisitions and divestments

 

Exploration & Production

 

On January 15, 2018, as part of the Strategic Alliance signed in March 2017, TOTAL announced the conclusion of transfer agreements from Petrobras to TOTAL:
o35% of the rights, as well as the role of operator in the Lapa field,
o22.5% of the rights of the Iara area.

The amount of this transaction is $ 1.95 billion.

The details of the acquisition are presented in Note 2.2 to the consolidated financial statements.

 

On March 1, 2018, TOTAL finalized the acquisition of Marathon Oil Libya Limited which holds a 16.33% stake in the Waha Concessions in Libya. This transaction amounts to $ 451 million.

The details of the acquisition are presented in Note 2.2 to the consolidated financial statements.

 

On March 8, 2018, TOTAL announced the closing of the Maersk Oil acquisition signed on August 21, 2017. The integration of Maersk Oil, which holds a portfolio of high quality assets, largely complementary to those held by TOTAL, and mainly located in OECD countries, allows the Group to become the second largest operator in the North Sea.

The details of the acquisition are presented in Note 2.2 to the consolidated financial statements.

 

On March 15, 2018, TOTAL finalized the sale to Statoil of all of its interests in the Martin Linge field (51%) and the discovery of Garantiana (40%) on the Norwegian Continental Shelf.

 

On March 18, 2018, TOTAL was awarded participating interests in two Offshore Concessions on Umm Shaif & Nasr (20%) and Lower Zakum (5%) in return for the payment of a global bonus of $ 1.45 billion.

 

On April 11, 2018, TOTAL acquired several assets located in the Gulf of Mexico as part of the Cobalt International Energy company’s bankruptcy auction sale.

 

Marketing & Services

 

In January, 2018, the sale of the joint venture TotalErg (Erg 51%, TOTAL 49%) to the Italian company API was finalized.

25

2.2) Major business combinations

 

In accordance with IFRS 3, TOTAL is assessing the fair value of identifiable acquired assets, liabilities and contingent liabilities on the basis of available information. This assessment will be finalised within 12 months following the acquisition date.

 

Exploration & Production

 

Transfer of rights in the Lapa and Iara concessions in Brazil

 

On January 15, 2018 Petrobras transferred to TOTAL 35% of the rights of the Lapa field which was put in production in December 2016, with a 100,000 barrel per day capacity FPSO.

 

Petrobras also transferred to TOTAL 22.5% of the rights of the Iara area. Production in Iara is expected to start in 2018 and 2019 depending on the fields.

 

The acquisition cost amounts to $1,950 million.

 

In the balance sheet as of June 30, 2018, the provisional fair value of identifiable acquired assets, liabilities and contingent liabilities amounts to $1,950 million.

 

The provisional purchase price allocation is shown below :

 

($ million) At the acquisition date
Intangible assets 1,072  
Tangible assets 1,662  
Other assets and liabilities (119 )
Net debt (665 )
Fair value of consideration transferred 1,950  

 

Marathon Oil Lybia Limited

 

On March 1, 2018, TOTAL finalized the acquisition of Marathon Oil Libya Limited which holds a 16.33% stake in the Waha Concessions in Libya. The acquisition cost amounts to $451 million.

 

In the balance sheet as of June 30, 2018, the provisional fair value of identifiable acquired assets, liabilities and contingent liabilities amounts to $451 million.

 

The provisional purchase price allocation is shown below :

 

($ million) At the acquisition date
Intangible assets 326  
Tangible assets 192  
Other assets and liabilities (91 )
Net debt 24  
Fair value of consideration transferred 451  

 

Maersk Oil

 

On March 8, 2018, TOTAL finalized the acquisition of Maersk Oil, following the signature of the « Share Transfer Agreement » on August 21, 2017.

 

The Group acquired all the voting rights of Maersk Olie og Gas A/S (Maersk Oil), a wholly owned subsidiary of A.P. Møller – Mærsk A/S (Maersk), for a purchase consideration of $5,741 million.

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This includes the fair value ($5,585 million) of 97,522,593 shares issued in exchange for all Maersk Oil shares, calculated using the market price of the company’s shares of 46.11 euros on the Euronext Paris Stock Exchange at its opening of business on March 8, 2018, and the amount of price adjustments ($156 million) paid on closing.

 

In the balance sheet as of June 30, 2018, the provisional fair value of identifiable acquired assets, liabilities and contingent liabilities amounts to $3,113 million.

 

The Group recognized a $2,628 million goodwill.

 

The provisional purchase price allocation is shown below:

 

($ million)     At the acquisition date
Goodwill 2,628  
Intangible assets 4,227  
Tangible assets 4,033  
Other assets and liabilities (3,223 )
Including provision for site restitution (2,100 )
Including deferred tax (675 )
Net debt (1,924 )
Fair value of consideration transferred 5,741  

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3) Adjustment items

 

Description of the business segments

 

Financial information by business segment is reported in accordance with the internal reporting system and shows internal segment information that is used to manage and measure the performance of TOTAL and which is reviewed by the main operational decision-making body of the Group, namely the Executive Committee.

 

The operational profit and assets are broken down by business segment prior to the consolidation and inter-segment adjustments.

 

Sales prices between business segments approximate market prices.

 

The organization of the Group’s activities is structured around the four followings segments:

 

-An Exploration & Production segment;

 

-A Gas, Renewables & Power segment including downstream Gas activities, New Energies activities (excluding biotechnologies) and Energy Efficiency division;

 

-A Refining & Chemicals segment constituting a major industrial hub comprising the activities of refining, petrochemicals and specialty chemicals. This segment also includes the activities of oil Supply, Trading and marine Shipping;

 

-A Marketing & Services segment including the global activities of supply and marketing in the field of petroleum products;

 

In addition the Corporate segment includes holdings operating and financial activities.

 

Adjustment items

 

Performance indicators excluding the adjustment items, such as adjusted operating income, adjusted net operating income, and adjusted net income are meant to facilitate the analysis of the financial performance and the comparison of income between periods.

 

Adjustment items include:

 

(i)Special items

 

Due to their unusual nature or particular significance, certain transactions qualified as “special items” are excluded from the business segment figures. In general, special items relate to transactions that are significant, infrequent or unusual. However, in certain instances, transactions such as restructuring costs or assets disposals, which are not considered to be representative of the normal course of business, may be qualified as special items although they may have occurred within prior years or are likely to occur again within the coming years.

 

(ii) The inventory valuation effect

 

The adjusted results of the Refining & Chemicals and Marketing & Services segments are presented according to the replacement cost method. This method is used to assess the segments’ performance and facilitate the comparability of the segments’ performance with those of its competitors.

 

In the replacement cost method, which approximates the LIFO (Last-In, First-Out) method, the variation of inventory values in the statement of income is, depending on the nature of the inventory, determined using either the month-end prices differential between one period and another or the average prices of the period rather than the historical value. The inventory valuation effect is the difference between the results according to the FIFO (First-In, First-Out) and the replacement cost.

 

(iii) Effect of changes in fair value

 

The effect of changes in fair value presented as adjustment items reflects for some transactions differences between internal measure of performance used by TOTAL’s management and the accounting for these transactions under IFRS.

 

IFRS requires that trading inventories be recorded at their fair value using period end spot prices. In order to best reflect the management of economic exposure through derivative transactions, internal indicators used to measure performance include valuations of trading inventories based on forward prices.

28

Furthermore, TOTAL, in its trading activities, enters into storage contracts, which future effects are recorded at fair value in Group’s internal economic performance. IFRS precludes recognition of this fair value effect.  

 

The adjusted results (adjusted operating income, adjusted net operating income, adjusted net income) are defined as replacement cost results, adjusted for special items and the effect of changes in fair value.

 

The detail of the adjustment items is presented in the table below.

 

ADJUSTMENTS TO OPERATING INCOME                        
                            
(M$)  Exploration
&
Production
  Gas,
Renewables
& Power
  Refining
&
Chemicals
  Marketing
&
Services
  Corporate  Total
2nd quarter  2018  Inventory valuation effect           569    134        703 
   Effect of changes in fair value       16                16 
   Restructuring charges                        
   Asset impairment charges       (424)               (424)
   Other items   (97)   (1)               (98)
Total      (97)   (409)   569    134        197 
2nd quarter  2017  Inventory valuation effect           (372)   (54)       (426)
   Effect of changes in fair value       (27)               (27)
   Restructuring charges   (40)                   (40)
   Asset impairment charges   (15)   1                (14)
   Other items   (77)   (25)   (39)   (26)   (64)   (231)
Total      (132)   (51)   (411)   (80)   (64)   (738)
1st half 2018  Inventory valuation effect           531    105        636 
   Effect of changes in fair value       5                5 
   Restructuring charges   (53)                   (53)
   Asset impairment charges       (446)               (446)
   Other items   (97)   (93)           (9)   (199)
Total      (150)   (534)   531    105    (9)   (57)
1st half 2017  Inventory valuation effect           (289)   (69)       (358)
   Effect of changes in fair value       (27)               (27)
   Restructuring charges   (40)                   (40)
   Asset impairment charges   (1,869)   (25)   (50)           (1,944)
   Other items   (77)   (114)   (65)   (26)   (64)   (346)
Total      (1,986)   (166)   (404)   (95)   (64)   (2,715)

29
ADJUSTMENTS TO NET INCOME, GROUP SHARE                        
                            
(M$)  Exploration
&
Production
  Gas,
Renewables
& Power
  Refining
&
Chemicals
  Marketing
&
Services
  Corporate  Total
2nd quarter  2018  Inventory valuation effect           436    81        517 
   Effect of changes in fair value       9                9 
   Restructuring charges   (44)   (2)               (46)
   Asset impairment charges       (236)               (236)
   Gains (losses) on disposals of assets   (2)                   (2)
   Other items   (71)   (3)               (74)
Total      (117)   (232)   436    81        168 
2nd quarter  2017  Inventory valuation effect           (268)   (42)       (310)
   Effect of changes in fair value       (19)               (19)
   Restructuring charges   (12)   (3)   (39)           (54)
   Asset impairment charges   (27)   (5)               (32)
   Gains (losses) on disposals of assets               125        125 
   Other items   (50)   (11)   (26)   (18)   (42)   (147)
Total      (89)   (38)   (333)   65    (42)   (437)
1st half 2018  Inventory valuation effect           412    60        472 
   Effect of changes in fair value       1                1 
   Restructuring charges   (59)   (8)               (67)
   Asset impairment charges       (248)               (248)
   Gains (losses) on disposals of assets   (103)                   (103)
   Other items   (51)   (58)   (17)       (9)   (135)
Total      (213)   (313)   395    60    (9)   (80)
1st half 2017  Inventory valuation effect           (210)   (45)       (255)
   Effect of changes in fair value       (19)               (19)
   Restructuring charges   (12)   (8)   (39)           (59)
   Asset impairment charges   (1,641)   (59)   (50)           (1,750)
   Gains (losses) on disposals of assets           2,139    125        2,264 
   Other items   (144)   (78)   (45)   (18)   (42)   (327)
Total      (1,797)   (164)   1,795    62    (42)   (146)
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4) Shareholders’ equity

 

Treasury shares (TOTAL shares held by TOTAL S.A.)

 

In accordance with the February 2018 announcements regarding the shareholder return policy over 2018-2020, TOTAL S.A. started share buybacks.

 

At June 30, 2018, TOTAL S.A. holds 41,429,820 of its own shares, representing 1.55% of its share capital, detailed as follows:

 

8,760,020 shares allocated to TOTAL share grant plans for Group employees;

 

69,759 shares intended to be allocated to new TOTAL share purchase option plans or to new share grant plans;

 

32,600,041 shares acquired and intended to be canceled out of which:

 

o9,820,488 shares definitively acquired during the first quarter and intended to be canceled,

 

o18,576,360 shares definitively acquired during the second quarter and intended to be canceled,

 

o4,203,193 shares corresponding to the portion not yet executed on June 30, 2018, of the share buyback for which the group is contractually bound.

 

These shares are deducted from the consolidated shareholders’ equity.

 

Dividend

 

The Annual Shareholders’ Meeting on June 1, 2018 approved the payment of a dividend of €2.48 per share for the 2017 fiscal year. Taking into account the three interim dividends of €0.62 per share that have been paid on October 12, 2017, January 11 and April 9, 2018, the remaining balance of €0.62 per share was paid on June 28, 2018.

 

The Annual Shareholders’ Meeting on June 1, 2018 approved that shareholders will be given the option to receive the 2017 final dividend in new shares or in cash. The share price of new shares has been set at €52.03 per share. This price is equal to the average opening price on Euronext Paris for the twenty trading days preceding June 1st, 2018, the date of the Annual Shareholders’ Meeting, reduced by the amount of the final dividend, without any discount. On June 28, 2018, 5,798,335 shares have been issued at a price of €52.03 per share.

 

Another resolution has been approved at the Annual Shareholders’ Meeting on June 1, 2018, if one or more interim dividends are decided by the Board of Directors for the fiscal year 2018, then shareholders will be given the option to receive this or these interim dividends in new shares or in cash.

 

The Board of Directors, during its April 25, 2018, meeting, decided to set the first interim dividend for the fiscal year 2018 at €0.64 per share. This interim dividend will be paid in cash or in shares on October 12, 2018 (the ex-dividend date will be September 25, 2018).

 

The Board of Directors, during its July 25, 2018, meeting, decided to set the second interim dividend for the fiscal year 2018 at €0.64 per share. This interim dividend will be paid in cash or in shares on December 18, 2018 (the ex-dividend date will be January 10, 2019).

 

Earnings per share in Euro

 

Earnings per share in Euro, calculated from the earnings per share in U.S. dollars converted at the average Euro/USD exchange rate for the period, amounted to €1.16 per share for the 2nd quarter 2018 (€0.81 per share for the 1st quarter 2018 and €0.71 per share for the 2nd quarter 2017). Diluted earnings per share calculated using the same method amounted to €1.16 per share for the 2nd quarter 2018 (€0.81 per share for the 1st quarter 2018 and €0.71 per share for the 2nd quarter 2017).

 

Earnings per share are calculated after remuneration of perpetual subordinated notes.

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Other comprehensive income

 

Detail of other comprehensive income showing items reclassified from equity to net income is presented in the table below:

 

(M$)   1st half 2018   1st half 2017
Actuarial gains and losses       67         158 
                    
Change in fair value of investments in equity instruments       5          
                    
Tax effect       (18)        (53)
Currency translation adjustment generated by the parent company       (2,630)        5,464 
Sub-total items not potentially reclassifiable to profit and loss       (2,576)        5,569 
                    
Currency translation adjustment       968         (1,418)
- unrealized gain/(loss) of the period   1,078        (1,372)     
- less gain/(loss) included in net income   110        46      
                    
Available for sale financial assets                 
- unrealized gain/(loss) of the period                 
- less gain/(loss) included in net income                 
                    
Cash flow hedge       255         34 
- unrealized gain/(loss) of the period   142        164      
- less gain/(loss) included in net income   (113)       130      
                    
Variation of foreign currency basis spread       (27)         
- unrealized gain/(loss) of the period   (27)             
- less gain/(loss) included in net income                 
                    
Share of other comprehensive income of equity affiliates, net amount
       (132)        (463)
- unrealized gain/(loss) of the period   (93)       (465)     
- less gain/(loss) included in net income   39        (2)     
                    
Other       (2)         
                    
Tax effect       (75)        (9)
Sub-total items potentially reclassifiable to profit and loss       987         (1,856)
Total other comprehensive income, net amount       (1,589)        3,713 
32

Tax effects relating to each component of other comprehensive income are as follows:

 

   1st half 2018  1st half 2017
(M$)  Pre-tax
amount
  Tax effect  Net amount  Pre-tax
amount
  Tax effect  Net amount
Actuarial gains and losses   67    (18)   49    158    (53)   105 
                               
Change in fair value of investments in equity instruments   5        5             
                               
Currency translation adjustment generated by the parent company   (2,630)       (2,630)   5,464        5,464 
Sub-total items not potentially reclassifiable to profit and loss   (2,558)   (18)   (2,576)   5,622    (53)   5,569 
                               
Currency translation adjustment   968        968    (1,418)       (1,418)
Available for sale financial assets                   (1)   (1)
Cash flow hedge   255    (81)   174    34    (8)   26 
                               
Variation of foreign currency basis spread   (27)   6    (21)            
Share of other comprehensive income of equity affiliates, net amount   (132)       (132)   (463)       (463)
Other   (2)       (2)            
Sub-total items potentially reclassifiable to profit and loss   1,062    (75)   987    (1,847)   (9)   (1,856)
Total other comprehensive income   (1,496)   (93)   (1,589)   3,775    (62)   3,713 

 

5) Financial debt

 

The Group has not issued any bond during the first six months of 2018.

 

The Group reimbursed bonds during the first six months of 2018:

 

-Bond 1.450% issued in 2013 and maturing in January 2018 (USD 1,000 million)

 

-Bond 2.500% issued in 2013 and maturing in June 2018 (NOK 600 million)

 

-Bond with floating rate coupon issued in 2014 and maturing in June 2018 (USD 135 million)

 

-Bond 3.125% issued in several tranches between 2006 / 2008 and maturing in June 2018 (CHF 525 million)

 

6) Related parties

 

The related parties are principally equity affiliates and non-consolidated investments. There were no major changes concerning transactions with related parties during the first six months of 2018.

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7) Other risks and contingent liabilities

 

TOTAL is not currently aware of any exceptional event, dispute, risks or contingent liabilities that could have a material impact on the assets and liabilities, results, financial position or operations of the Group.

 

Alitalia

 

In the Marketing & Services segment, a civil proceeding was initiated in Italy, in 2013, against TOTAL S.A. and its subsidiary Total Aviazione Italia Srl before the competent Italian civil court. The plaintiff claims against TOTAL S.A., its subsidiary and ot